Microsoft can still win with an iPad version of Office, but only if the touch interface is exceptional.
Talking about a new interface is different than creating one, of course. Many of Microsoft's attempts to implement touch-first models, such as the Modern UI home screen, have met with mixed-to-negative reviews. The version of Office that comes baked into Windows Phones and that's available via Office 365 subscriptions for iPhones and Android smartphones was likewise greeted with a collective shrug. Given this history, Microsoft could certainly bomb out with a haptic-focused Office.
But none of Microsoft's competitors has really cracked mobile productivity either. iWork, Quickoffice and other replacements for Office on the iPad are filling gaps, but none has rewritten the book. If Microsoft's long development period culminates in a product that's useful both with and without a keyboard, users will be more likely to open their wallets.
In his latest remarks, Ballmer offered few hints. He explicitly confirmed for the first time that an iPad-native version of Office is coming, bringing clarity to a recent a series of hints and partial statements. But the company already has some pieces in place. Cloud hooks are an important aspect of modifying and sharing documents while mobile, and though Apple appears to be making efforts in this vein, Microsoft is further along.
The extent to which Microsoft translates Office's power and deep feature set to a new interaction model, though, will dictate the extent to which the software will succeed, especially among consumers and BYOD workers. If iWork offers 95% of Office's utility for most iPad users, Microsoft will be pressured to release the app for free or for little cost, or to risk remaining a niche tablet player if it insists on coupling the iPad version to Office 365, as it has with the iPhone edition. But if Microsoft delivers a superior interaction model, it can make up for lost time, and then some.
Office for the iPad also means that Windows tablets will have to stand on their own merits, rather than using the world's most ubiquitous PC productivity software as a crutch. That makes the Office UI stakes that much higher. In other words, if Windows tablets continue to trail iOS and Android tablets in popularity, software and services represent Microsoft's alternate path to short-term tablet relevance. That means if Office for the iPad underwhelms because it's not meaningfully better than competitors, Microsoft will be striking out on multiple fronts.
Microsoft's challenges have grown so large mostly because the company's mobile push arrived so late. But much of that can change, as long as touch-first Office apps are worth the wait.